California Water Service Group Announces Second Quarter 2014 Results

SAN JOSE, CA--(Marketwired - Jul 30, 2014) - California Water Service Group (NYSE: CWT) today announced net income of $17.2 million or $0.36 per diluted common share for the second quarter of 2014, compared to net income of $13.5 million or $0.28 per diluted common share for the second quarter of 2013. Included in the second quarter of 2014 operating results is a $2.5 million (or $0.05 per diluted common share) non-recurring tax benefit.

Revenue for the second quarter of 2014 was $158.4 million, compared to revenue of $154.6 million in second quarter 2013, in part due to higher estimated unbilled revenue. The unbilled revenue increase resulted from higher consumption at the end of the quarter which is not included in the water revenue adjustment mechanism (WRAM).

Total operating expenses for the second quarter of 2014 increased $1.4 million, or 1%, to $135.1 million. Increases in water production costs, primarily purchased water cost increases, were partially offset by decreases in other operating expenses, income taxes, and property and other taxes. Maintenance expense increased $0.8 million, or 19%, to $5.0 million, while depreciation expense increased $1.6 million, or 11%, to $16.1 million due to 2014 capital additions.

Other income, net of income taxes, increased $0.7 million in the second quarter of 2014, primarily due to an increase in unrealized gains on our benefit plan insurance investments. Interest expense decreased $0.4 million, or 6%, to $6.9 million due to the Company's repayment of long-term debt in 2013. 

A delay in the decision on the Company's largest subsidiary's General Rate Case, filed with the California Public Utilities Commission (CPUC) in 2012, continued to impact results for the quarter. On July 21, 2014, the CPUC issued a Proposed Decision on California Water Service Company's (Cal Water) General Rate Case. The Proposed Decision will not become effective until it has been reviewed and approved by the CPUC. The Commission may adopt the proposed decision, modify it, or reject it.

Until the Proposed Decision is adopted, Cal Water will continue to track the difference between approved interim rates and new rates that are eventually adopted in a memorandum account. After new rates are implemented, the memorandum account balance will be collected through customer surcharges over 12, 24, or 36 months. Had the Commission approved the settlement proposed by the parties effective January 1, 2014, the new rates would have increased pre-tax income $10.2 million for the six month period ended June 30, 2014. The proposed new rates would have added the following to the Company's results in 2014: $16.1 million of pre-tax income for service charges, flat rate, and fire protection rate increases, $1.6 million of pre-tax income from the proposed new health care balancing account, and a $7.5 million reduction to WRAM pre-tax income. 

"We are pleased to have a Proposed Decision in Cal Water's General Rate Case. We are looking forward to receiving a final decision that will allow us to recover prudently incurred costs of providing a safe, reliable water supply and earn a reasonable return on critical infrastructure investments," said President and Chief Executive Officer Martin A. Kropelnicki.

"Having this lengthy proceeding behind us will enable us to focus all of our attention on meeting our customers' need for a reliable supply of high quality water in the midst of one of the most serious droughts in the state's history," he said.

All stockholders and interested investors are invited to listen to the teleconference. The 2014 second quarter conference call may be accessed by dialing 1-888-572-7033 or 1-719-325-2491 and keying in ID# 3765528. A replay of the call will be available from 2:00 p.m. ET on Thursday, July 31, 2014 through September 30, 2014, at 1-888-203-1112 or 1-719-457-0820, ID# 3765528. The call, which will be hosted by President and Chief Executive Officer Martin A. Kropelnicki and Vice President and Chief Financial Officer Thomas F. Smegal, will also be webcast under the investor relations tab at www.calwatergroup.com.

California Water Service Group is the parent company of California Water Service Company, Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, Inc., CWS Utility Services, and HWS Utility Services. Together these companies provide regulated and non-regulated water service to approximately 2 million people in more than 100 California, Washington, New Mexico, and Hawaii communities. Group's common stock trades on the New York Stock Exchange under the symbol "CWT." Additional information is available at our web site at www.calwatergroup.com.

This news release contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 ("Act"). The forward-looking statements are intended to qualify under provisions of the federal securities laws for "safe harbor" treatment established by the Act. Forward-looking statements are based on currently available information, expectations, estimates, assumptions and projections, and management's judgment about the Company, the water utility industry and general economic conditions. Such words as would, expects, intends, plans, believes, estimates, assumes, anticipates, projects, predicts, forecasts or variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not guarantees of future performance. They are subject to uncertainty and changes in circumstances. Actual results may vary materially from what is contained in a forward-looking statement. Factors that may cause a result different than expected or anticipated include, but are not limited to: governmental and regulatory commissions' decisions; changes in regulatory commissions' policies and procedures; the timeliness of regulatory commissions' actions concerning rate relief; changes in the capital markets and access to sufficient capital on satisfactory terms; new legislation; changes in California Department of Public Health water quality standards; changes in environmental compliance and water quality requirements; changes in accounting valuations and estimates; changes in accounting treatment for regulated companies, including adoption of International Financial Reporting Standards, if required; electric power interruptions; increases in suppliers' prices and the availability of supplies including water and power; fluctuations in interest rates; litigation that may result in damages or costs not recoverable from third parties; acquisitions and our ability to successfully integrate acquired companies; the ability to successfully implement business plans; civil disturbances or terrorist threats or acts, or apprehension about the possible future occurrences of acts of this type; the involvement of the United States in war or other hostilities; our ability to attract and retain qualified employees; labor relations matters as we negotiate with the unions; federal health care law changes that could result in increases to Company health care costs and additional income tax expenses in future years; changes in federal and state income tax regulations and treatment of such by regulatory commissions; implementation of new information technology systems; changes in operations that result in an impairment to acquisition goodwill; restrictive covenants in or changes to the credit ratings on current or future debt that could increase financing costs or affect the ability to borrow, make payments on debt, or pay dividends; general economic conditions, including changes in customer growth patterns and our ability to collect billed revenue from customers; changes in customer water use patterns and the effects of conservation; the impact of weather and climate on water availability, water sales and operating results; the ability to satisfy requirements related to the Sarbanes-Oxley and Dodd-Frank Acts and other regulations on internal controls; and, other risks and unforeseen events. When considering forward-looking statements, you should keep in mind the cautionary statements included in this paragraph, as well as the annual 10-K, Quarterly 10-Q, and other reports filed from time-to-time with the Securities and Exchange Commission (SEC). The Company assumes no obligation to provide public updates of forward-looking statements.

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands, except per share data)				June 30,				December 31,
				2014				2013
ASSETS
Utility plant:
	Utility plant			$	2,269,779			$	2,213,328
	Less accumulated depreciation and amortization				(730,266	)			(697,497	)
		Net utility plant			1,539,513				1,515,831
Current assets:
	Cash and cash equivalents				29,706				27,506
	Receivables:
		Customers			34,278				31,468
		Regulatory balancing accounts			26,978				30,887
		Other			13,825				18,700
	Unbilled revenue				28,055				17,034
	Materials and supplies at weighted average cost				5,952				5,571
	Taxes, prepaid expenses and other assets				12,014				8,324
		Total current assets			150,808				139,490
Other assets:
	Regulatory assets				264,245				251,681
	Goodwill				2,615				2,615
	Other assets				53,003				50,238
		Total other assets			319,863				304,534
				$	2,010,184			$	1,959,855
CAPITALIZATION AND LIABILITIES
Capitalization:
	Common stock, $.01 par value			$	478			$	477
	Additional paid-in capital				329,332				328,364
	Retained earnings				266,082				269,915
		Total common stockholders' equity			595,892				598,756
	Long-term debt, less current maturities				423,334				426,142
		Total capitalization			1,019,226				1,024,898
Current liabilities:
	Current maturities of long-term debt				6,550				7,908
	Short-term borrowings				81,215				46,815
	Accounts payable				70,906				55,087
	Regulatory balancing accounts				6,603				1,827
	Accrued interest				4,240				4,245
	Accrued expenses and other liabilities				52,560				50,702
		Total current liabilities			222,074				166,584
Unamortized investment tax credits					2,106				2,106
Deferred income taxes, net					180,956				183,245
Pension and postretirement benefits other than pensions					145,426				145,451
Regulatory and other liabilities					90,134				86,455
Advances for construction					181,443				183,393
Contributions in aid of construction					168,819				167,723
				$	2,010,184			$	1,959,855

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)
For the Three-Months ended:
				June 30,				June 30,
				2014				2013
Operating revenue				$	158,416			$	154,555
Operating expenses:
	Operations:
		Water production costs			61,915				59,645
		Administrative and general			23,796				23,155
		Other operations			16,004				17,030
	Maintenance				4,988				4,188
	Depreciation and amortization				16,087				14,491
	Income taxes				7,190				9,548
	Property and other taxes				5,144				5,715
		Total operating expenses			135,124				133,772
		Net operating income			23,292				20,783
Other income and expenses:
	Non-regulated revenue				3,474				3,215
	Non-regulated expenses, net				(2,253	)			(3,240	)
	Income tax (expense) benefit on other income and expense				(481	)			16
		Net other income (loss)			740				(9	)
Interest expense:
	Interest expense				7,077				7,803
	Less: capitalized interest				(215	)			(539	)
		Net interest expense			6,862				7,264
Net income				$	17,170			$	13,510
Earnings per share
	Basic			$	0.36			$	0.28
	Diluted			$	0.36			$	0.28
Weighted average shares outstanding
	Basic				47,804				47,729
	Diluted				47,837				47,760
Dividends declared per share of common stock				$	0.1625			$	0.1600
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)
For the Six-Months ended:
				June 30,				June 30,
				2014				2013
Operating revenue				$	268,931			$	265,999
Operating expenses:
	Operations:
		Water production costs			107,317				101,342
		Administrative and general			48,937				48,436
		Other operations			32,380				32,675
	Maintenance				9,993				8,321
	Depreciation and amortization				32,140				29,120
	Income taxes				3,351				8,402
	Property and other taxes				10,369				11,150
		Total operating expenses			244,487				239,446
		Net operating income			24,444				26,553
Other income and expenses:
	Non-regulated revenue				7,754				6,737
	Non-regulated expenses, net				(6,372	)			(5,657	)
	Income tax (expense) on other income and expense				(560	)			(435	)
		Net other income			822				645
Interest expense:
	Interest expense				14,152				15,840
	Less: capitalized interest				(580	)			(1,079	)
		Net interest expense			13,572				14,761
Net income				$	11,694			$	12,437
Earnings per share
	Basic			$	0.24			$	0.28
	Diluted			$	0.24			$	0.28
Weighted average shares outstanding
	Basic				47,780				45,004
	Diluted				47,818				45,034
Dividends declared per share of common stock				$	0.3250			$	0.3200

1720 North First Street
San Jose, CA 95112-4598